Question

You have $5,000 to deposit. Regency Bank offers 15 percent per year compounded monthly (1.25 percent per month), while King Bank offers 15 percent but will only compound annually. How much will your investment be worth in 20 years at each Bank? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Investment value Regency Bank $ King Bank $

Answer 1

Answer:

Regency Bank

A = $98577.46

king Bank

A = $81832.68

Explanation:

Given Data:

principle amount  =$ 5000

rate of interest = 15%

n =12 {compounded months}

t = 20 year

for Regency Bank

investment amount obtained as

$A =P\times [1 + \frac{r}{n}]^{nt}$

$A = 5000 [1 + \frac{0.15}{12}]^{12\times 20}$

A = $98577.46

for King Bank

Investment amount obtained as

$A =P\times [1 + \frac{r}{n}]^{nt}$

Here n = 1

$A = 5000 [1 + \frac{0.15}{1}]^{1\times 20}$

A = $81832.68